Valero Energy Corp. has advantages over its competitors because of the San Antonio refiner's increasing production of high-margin distillates and its low operating costs, CEO Bill Klesse said Wednesday at a conference.

Klesse, who provided a company update at the Credit Suisse Energy Summit in Colorado, said Valero is taking advantage of growing U.S. shale oil production, including from the Eagle Ford Shale and Canada.

The crude from shale is cheaper to acquire than foreign crude, and Valero has increased the amount of domestic light crude oils as more crude has become available.

As Klesse reminded analysts during the company's most recent earnings call on Jan. 29, Valero has stopped all imports of foreign light crude to its Gulf Coast and Memphis, Tenn., refineries.

Valero's low operating costs — and the low cost of U.S. natural gas needed to run its plants — means it can ship products for about $2 dollars a barrel less than foreign competitors, Klesse said. That advantage outweighs the cost of shipping products, he said.

Cheap natural gas is “why the U.S. can have a manufacturing resurgence,” he said. “It's very unique to our country.”

Klesse noted that demand for distillate fuels — such as diesel and jet fuel — is growing about two times faster than demand for gasoline throughout the world. “Europe is systemically short” of distillate, he said.

“Distillates are where we want to be. Valero is a little different from the other guys because we have built these projects,” Klesse added, referring to two hydrocrackers — the biggest and most expensive projects in the company's history — at its Port Arthur refinery and its St. Charles plant in Louisiana.

The $1.6 billion Port Arthur hydrocracker was completed in December, and Valero expects its St. Charles hydrocracker to begin operating in the second quarter.

Klesse said he expects the company's ratio of gasoline to distillates will become 1-to-1 soon, which would be “very unique for a U.S. refiner.”

When the St. Charles hydrocracker begins operations, the company will be close to producing as much diesel as gasoline, company spokesman Bill Day said.